U.S Presidency and Congress are to blame for exploding debt burden

The issuance of debt as a tool to ‘develop’ an economy has shown to be futile throughout history and its fruit is being seen now

By LUIS MIRANDA | THE REAL AGENDA | JANUARY 8, 2013

U.S. President Barack Obama today attempted to scare Americans by using a spooky tone when talking about the need to continue enslaving them for the rest of their lives. Obama warned that not lifting the debt ceiling so the United States can borrow another trillion dollars or so would have “catastrophic” for the global economy.

Obama threatened Republicans by saying that if Congress does not increase the ceiling in a timely manner he would not sit down to negotiate, which implicitly means he will use his emperor’s power to raise the debt ceiling by executive order.

In his weekly radio address, Obama referred to the great challenge facing the U.S. Congress, after they came to an agreement on the so-called fiscal cliff. The debt limit authorized by Congress, which was at 16.39 trillion was exceeded Monday.

Congress now has about two months to increase the threshold again and keep the country from a supposed  default. Republicans now seek to attach any agreement on the debt ceiling to cuts in public spending, which the White House rejects as a start point to begin the negotiations.

“One thing I’m not willing to make concessions on is whether or not Congress should pay the debt in an account that they themselves have built,” said Obama. “If Congress refuses to grant the United States the ability to pay its bills on time, the consequences for the entire global economy could be catastrophic,” he said.

The president recalled that “the last time Congress threatened to take that course of action” during the negotiations in mid-2011, “our entire economy suffered for it. Our families and our businesses can not stand that dangerous game again,” he added. “Our economy can not cope with more protracted clashes or manufactured crises,” he said. However, Obama himself has been one of the main enablers of the current crisis in the United States and the rest of the world by continuing the same failed policies from previous administrations.

The White House looks for ways to avoid a repeat of the acrimonious debates in the legislature of summer 2011, which led to the loss of the triple A rating on U.S. debt for the first time in history. The dispute was finally resolved with a new rise in debt, but Congress delayed the broader solution to the problem of debt and fiscal deficit until after the presidential election of November 2012. Clearly, neither the American Congress nor the White House led by Barack Obama have the best interests of the American economy in mind as both parts resort to political games before actually sitting down to truly solve the debt burden.

Obama has sought to separate disputes over U.S. budget deficit and the national debt ceiling, but Republicans insist on linking them, noting that the debt will not be solved without adjusting the budget. The U.S. national debt is now larger than the GDP of the country, however, the United States artificially continues to hold debt ratings that are better than other countries whose debt is inferior to their GDP’s. Is the credit worthiness score provided by Moody’s and other bank-owned houses a sham? Absolutely. The U.S. should have defaulted completely a long time ago.

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Do away with Reserve Currencies and Centralized Financial Control

By LUIS MIRANDA | THE REAL AGENDA | SEPTEMBER 13, 2012

For way too many years, the United States has enjoyed an unfair advantage with respect to the rest of the world: most international commerce is conducted in US dollars. Both friends and foes of the US have had to purchase raw materials, parts, finished products, pay tariffs and exchange rates in dollars because the world saw the American currency as a strongly positioned instrument that was backed by the economic and military might of the United States.

The result of having a reserve currency, both for the US and for the rest of the world is clear: Americans have enjoyed decades of bounty because almost anything that is necessary to live is paid for and purchased in US dollars. From crude oil to food staples, countries and companies use the US dollar to complete most commercial transactions. But the bounty for Americans was not the only consequence — or goal, depending how you see it. Because the US dollar was the reserve currency of the world, its value was kept artificially high. People, companies and other countries bought US dollars to use them in their daily activities such as traveling expenses, for example.

The value of the currency, especially a fiat one like the US dollar is artificial because after the central bank decides to print money beyond what a country produces — GDP — in order to run a debt-based economy, it is just a matter of time before the wheels of the truck come off. In the case of the United States, three and a quarter of the four wheels have already fallen off. The US currency has been hyper-inflated in a controlled manner since the creation of the Federal Reserve System, which is the same system of centralized power used in almost every single nation in the world; no matter if it’s a developed, developing or underdeveloped country.

Today, the value of the dollar, the Euro, the Peso or the Real do not represent the capacity of a country to produce, innovate and sell goods in local, regional or international markets through bilateral or multilateral agreements. The value of currencies is set by banking institutions and then freely manipulated by artificially-managed markets, not real capitalism or free markets.

The kind of “commercial contract” that helped the US to sets its currency as the “world reserve currency” and that provided the unfair advantage against its business partners and competitors is now reaching its end. The rise of China as one of the largest producers of finished products — through questionable standards to say the least — along with the economically weaker position of the United States in the world stage, has prompted nations to seek alternative forms of completing commercial transactions that do not use US dollars. United States competitors, especially those who lend money to the country, realized that the United States will most likely default on its debt or will simply pay with a devalued currency which will not be worth much, so they’ve decided to use their own currencies instead of the US dollar.

For example, China and Russia have closed several agreements to realize commercial transactions in their own currency as supposed to using dollars. The Chinese and the Russians, it seems, learned that by using the Yuan and the Ruble, they are not only valuing their currencies, but are also avoiding to pay the “dollar tax”, or the cost of having to buy and sell in US dollars, which had kept them in a competitive disadvantage against their commercial and military foe.

The devaluation of the dollar due to banking manipulation conducted by the Federal Reserve or the weakening of the currency in international markets — is bad news for the US and the American people, because it means that if the dollar fails to keep its status as the reserve currency, everything will be more expensive for them: raw materials, food, energy, interest rates, etc. But worse than all of that is that the demand for US dollars in the world will significantly decrease, which in itself will turn the dollar into a less attractive way to pay for and sell goods and services.

The loss in value of the American currency will also worsen another problem: the US debt. The US has been for a long time the best debtor nation in the world, for its lenders thought that since the country had the world’s reserve currency would guarantee that their loans would be paid in full. But now, reality shows otherwise. The fall of the US dollar from the pedestal of “world reserve currency” will also make it more expensive for the US to pay its current debt as well as the debt it will incur into in the coming years and decades. The weaker the dollar is, the more expensive it becomes for the US to pay its debts. This scenario is now seen in Spain, Greece, Italy and Portugal, who have handed their sovereignty to foreign banking institutions in exchange for “financial rescues”.

Although common wisdom would suggest that US indebtedness with China would be the worst possible situation while the dollar declines, there is actually a worse scenario and it does not involve China. The US main lender is not China anymore, but the Federal Reserve Banking System, a private institution that represents the interests of an international banking consortium located abroad, not in the United States.

The banking mafia will continue to willingly lend to the US because all debt created by the Federal Reserve in the name of the United States and its people will always have a way to be paid. The United States, just as many other countries in the world do, mortgage the lives of present and future people by taxing them to death in order to pay interests on the ever exploding debt. This ‘trust’ that the banking institutions have in the United States and other nations can only be broken if the US dollar fails as the world reserve currency. That is why the European bankers have created parallel fiat currencies such as the Euro, which they also intend to collapse in order to establish a sort of electronic untraceable form of currency.

At the same time and while it is still possible, wealthy individuals who have made their fortunes through deceitful practices, such as George Soros, as well as governments have begun a race to get rid of their dollar reserves — a fact that also weakens the US currency — and invest in gold, rare metals, silver and other valuable instruments. The divestment of funds from US dollars to other currencies or valuable metals or materials threatens to accelerate the fall of the once strong world reserve currency.

The decline of the US dollar has emboldened countries like China to seriously consider letting its currency fluctuate freely in the open market. This practice is set to begin at some point in 2015 and will continue until 2017, the Chinese have said. Do the Chinese feel that by 2015 the dollar will be weak enough that it won’t be able to directly compete with the Yuan? Perhaps. But in a financial world where almost everything is fake, there is no reason to believe that the American government or the banking institutions that it represents will not come up with a way to slow down or stop the collapse of its currency. Many financial experts expect the opposite, though. Some of them even believe that the collapse of the dollar will happen some time between the Winter of 2012 and the Spring of 2013.

If there is one thing the world has learned is that independent nation-states that establish commercial agreements in a bilateral or multilateral fashion are better off that those which are prisoners of a common currency with a centralized financial power system. The only reason why the world is dominated by common currencies and so-called unions is because those schemes facilitate monopolies and control, which is what the international banking mafia wants. The Euro is a clear example of how monopoly works perfectly well when a group of oligarchs intends to artificially create economies to later collapse them so that they can consolidate power. It works beautifully. For the rest of us, let’s do away with reserve currencies that provide unfair advantages as well as centralized power that only renders benefits for the Anglo-Saxon power elite.

US borrowing tops 100% of GDP

AFP
August 4, 2011

US debt shot up $238 billion to reach 100 percent of gross domestic project after the government’s debt ceiling was lifted, Treasury figures showed Wednesday.

Treasury borrowing jumped Tuesday, the data showed, immediately after President Barack Obama signed into law an increase in the debt ceiling as the country’s spending commitments reached a breaking point and it threatened to default on its debt.

The new borrowing took total public debt to $14.58 trillion, over end-2010 GDP of $14.53 trillion, and putting it in a league with highly indebted countries like Italy and Belgium.

Public debt subject to the official debt limit — a slightly tighter definition — was $14.53 trillion as of the end of Tuesday, rising from the previous official cap of $14.29 trillion a day earlier.

Treasury had used extraordinary measures to hold under the $14.29 trillion cap since reaching it on May 16, while politicians battled over it and over addressing the country’s bloating deficit.

The official limit was hiked $400 billion on Tuesday and will be increased in stages over the next 18 months.

The last time US debt topped the size of its annual economy was in 1947 just after World War II. By 1981 it had fallen to 32.5 percent.

Ratings agencies have warned the country to reduce its debt-to-GDP ratio quickly or facing losing its coveted AAA debt rating.

Moody’s said Tuesday that the government needed to stabilize the ratio at 73 percent by 2015 “to ensure that the long-run fiscal trajectory remains compatible with a AAA rating.”

Debt will Increase by $7 trillion in 10 Years

Sen. Rand Paul
August 2, 2011

Today Sen. Rand Paul issued an open letter on the subject of the debt ceiling compromise facing the Senate. Below is that letter.

United States Senator, Rand Paul

To paraphrase Senator Jim DeMint: When you’re speeding toward the edge of a cliff, you don’t set the cruise control. You stop the car. The current deal to raise the debt ceiling doesn’t stop us from going over the fiscal cliff. At best, it slows us from going over it at 80 mph to going over it at 60 mph.

This plan never balances. The President called for a “balanced approach.” But the American people are calling for a balanced budget.

This deal does nothing to fix the overreaches of both parties over the past few years: Obamacare, TARP, trillion-dollar wars, runaway entitlement spending. They are all cemented into place with this deal, and their legacy will be trillions of dollars in new debt.

The deal that is pending before us now:

  • Adds at least $7 trillion to our debt over the next 10 years. The deal purports to “cut” $2.1 trillion, but the “cut” is from a baseline that adds $10 trillion to the debt. This deal, even if all targets are met and the Super Committee wields its mandate – results in a BEST case scenario of still adding more than $7 trillion more in debt over the next 10 years. That is sickening.
  • Never, ever balances.
  • The Super Committee’s mandate is to add $7 trillion in new debt. Let’s be clear: $2.1 trillion in reductions off a nearly $10 trillion,10-year debt is still more than $7 trillion in debt. The Super Committee limits the constitutional check of the filibuster by expediting passage of bills with a simple majority. The Super Committee is not precluded from any issue, therefore the filibuster could be rendered most. In addition, the plan harms the possible passage of a Balanced Budget Amendment. Since the goal is never to balance, having the BBA as a “trigger” ensures that the committee will simply report its $1.2 trillion deficit reduction plan and never move to a BBA vote.
  • It cuts too slowly. Even if you believe cutting $2.1 trillion out of $10 trillion is a good compromise, surely we can start cutting quickly, say $200 billion-$300 billion per year, right? Wrong. This plan so badly backloads the alleged savings that the cuts are simply meaningless. Why do we believe that the goal of $2.5 trillion over 10 years (that’s an average of $250 billion per year) will EVER be met if the first two years cuts are $20 billion and $50 billion. There is simply no path in this bill even to the meager savings they are alleging will take place.

Buried in the details of this bill is the automatic debt limit increase proposed a few weeks ago. The second installment of the debt ceiling increase is initiated by the President automatically and can only be stopped by a two-thirds vote of Congress. This shifts the Constitutional check on borrowing from Congress to the President and makes it easier to raise the debt ceiling. Despite claims to the contrary, none of the triggers in this bill include withholding the second limit increase.

Credit rating agencies have clearly stated the type of so-called cuts envisioned in this plan will result in our AAA bond rating being downgraded. Ironically then, the only way to avoid our debt being downgraded and the resulting economic problems that stem from that is for this bill to fail.

This plan does not solve our problem. Not even close. I cannot abide the destruction of our economy, therefore I vigorously oppose this deal and I urge my colleagues and the American people to do the same.

Sincerely,

Rand Paul, M.D.
United States Senator

Moody’s: No Debt Ceiling, Continue Charade

The Credit Rating Agency founded by Berkshire Hathaway wants the fiscal charade to continue, but does not want limits. And who the heck gave this corporation the right to rate anything? The Bankers.

By Walter Brandimarte
Reuters
July 18

Ratings agency Moody’s on Monday suggested the United States should eliminate its statutory limit on government debt to reduce uncertainty among bond holders.

The United States is one of the few countries where Congress sets a ceiling on government debt, which creates “periodic uncertainty” over the government’s ability to meet its obligations, Moody’s said in a report.

“We would reduce our assessment of event risk if the government changed its framework for managing government debt to lessen or eliminate that uncertainty,” Moody’s analyst Steven Hess wrote in the report.

The agency last week warned it would cut the United States’ AAA credit rating if the government misses debt payments, increasing pressure on Republicans and the White House to come up with a budget agreement.

Moody’s said it had always considered the risk of a U.S. debt default very low because Congress has regularly raised the debt ceiling during many decades, usually without controversy.

However, the current wide divisions between the House of Representatives and the Obama administration over the debt limit creates a high level of uncertainty and causes us to raise our assessment of event risk,” Hess said.

Stepping further into the heated political debate about U.S. debt problems, Moody’s suggested the government could look at other ways to limit debt.

It cited Chile, widely praised as Latin America’s most fiscally-sound country, as an example.

“Elsewhere, the level of deficits is constrained by a ‘fiscal rule,’ which means the rise in debt is constrained though not technically limited,” Moody’s said, adding that such rule has been effective in Chile.

It also cited the example of the Maastricht criteria in Europe, which determines that the ratio of government debt to GDP should not exceed 60 percent. It noted, however, that such a rule is often breached by the governments.

In the United States, Moody’s said the debt limit had not effectively curbed the rise in government debt because lawmakers regularly raise it and because that limit is not related to the level of expenditures approved by Congress.